Sygnity S.A. FY 2015 financial results


Sygnity has published its audited annual report for FY 2014/2015 beginning October 1, 2014 and ending September 30, 2015. After previous three quarters with positive result and keeping profitability at a satisfying level, in Q4 FY 2014/2015 a coincidence of unfavorable events, partly one-off, has impacted the company results. Sygnity is consistently strengthening its position with stable order book. The value of revenues from contracts signed by December 15, 2015 is nearly PLN 320 million.

The situation of the entire IT industry in Poland in 2015 has been very difficult due to postponement of launch of targeted financing with the EU funds. Several planned projects were shelved, causing fierce price competition among the IT companies on the Polish market, resulting in erosion of margins also in other segments of the IT market not relating to the public administration. Q4 FY 2014/2015 did not bring the expected breakthrough on the public procurement market. By value this sector is the biggest customer of the entire IT industry and constitutes the biggest part of revenues of Sygnity S.A.

At present the company is delivering numerous significant IT contracts for top level government agencies, public and financial institutions as well as power utilities. Public sector customers notably include the ZUS Social Insurance Institution, ARiMR Agency for Restructuring and Modernization of Agriculture, PFRON National Disabled Persons Rehabilitation Fund, the Ministry of Labor and Social Policy, all Labor Offices, as well as 2 000 Social Benefits Centers. Key banking sector customers include the KIR National Clearing House, the BGK bank and biggest banks in Poland. The utilities sector is represented by, among others, PSE Polish Power Grid, Energa-Operator, PGNiG and Tauron.

Products and services offered by Sygnity form the bloodstream of many key government and private institutions. It is worth noting that we are winning contracts through tenders with our competences and the quality of our offering. It is possible thanks to many years of presence of our consulting and software development teams in these sectors as well as the deep internal reorganization the entire company went through
– says the President of the Management Board, Janusz R. Guy.

Revenues of the Sygnity Group in fiscal year 2014/2015 were PLN 429.3 million (-14% y/y). In Q4 alone the revenues reached PLN 95.8 million (-24% y/y). Revenues on sales of product and services constituted 91% of the total sales by the Group. Reduced sales revenues in Q4 of FY 2014/2015 resulted from a drop of revenues from the public sector and additionally from postponement of several project acceptances initially planned for that quarter.

Gross profit on sales in FY 2014/2015 was PLN 70.0 million, and EBITDA was 19.1 million, while the net loss was PLN 4.2 million. EBITDA margin was 4.4%, and EBIT margin was 0.9 %. In Q4 alone the gross profit on sales was PLN 11.4 million, adjusted EBITDA was PLN 29 thousand and net loss was PLN 10.2 million.

It is worth noting that the first three quarters of the fiscal year were closed with a positive result, maintaining profitability at a satisfying level. However, the results were impacted in Q4 FY 2014/2015 by a coincidence of unfavorable, partly one-off events. Primarily it was the extended slowdown in the public sector, which in the opinion of the Management Board, however, to a significant extent is already over for the industry and for Sygnity, as well as the provisions and write-offs that amounted to PLN 10.3 million and included: provisions established for warranty repairs, reappraisal of the e-Health project (down by PLN 3.5 million), write-off for Corporate Income Tax imposed on the company for 2008 (PLN 3.3 million), write-off of accounts receivable from the Katowice City Hall (PLN 0.8 million). The results of Q4 also reflect the negative effect of tax loss carryforward expiration in amount of PLN 2.9 million.

After effectuating the write-offs and establishment of provisions I can say that Sygnity is entering its next fiscal year with a clean record, and the positive elements, that is numerous new contracts and a big backlog combined with a “well-oiled” mechanism of the company that allows keeping profitability in hard times, will allow us to achieve positive dynamics both in revenues and in profits in the next fiscal year
– sums up President Guy.

Sygnity is consistently building its order book for FY 2015/2016. Revenues from contracts signed by December 15, 2015 are nearly PLN 320 million. Compared to July 31, 2015 the backlog has doubled. This amount also includes the potential revenues from delivery of further stages of the e-Health project; however its share in the total 2016 backlog is just a few percent.

According to the previsions, key contracts, both in the public and in banking and financial sectors, that were delayed in recent months started to materialize at the end of the year. In FY 2015 Q4 and the following months of 2015 the company has signed several important contracts, including with ZUS, one of the largest banks in Poland, and the BGK. Among the key contracts signed in Q4 of FY 2015 alone one should mention the public sector contract with the Ministry of Labor and Social Policy for development and maintenance of the Public Employment Services System. In the utilities sector another contract was signed with EDF Polska for delivery of Microsoft licenses and a training and technical support package.

I wish to stress that our order book, and importantly, the pipeline of projects we are working on is becoming more and more diversified as to the share in key sectors, customers, scope of products and services supplied, and value of orders. This diversification results in better profitability of our future deliverables
– comments the President of Sygnity S.A

At present Sygnity is at the stage of completion of its business revitalization process and implementation of its new 5-year Strategic Plan. The Plan is already complete and its assumptions have been approved by the Supervisory Board.

We intend to present this strategy to the market within two months. The strategy of Sygnity Group will be definitely oriented on growth, both organic, concerning innovative products and services (e.g. in telco, cloud computing technologies, mobile services and similar domains), as well as through acquisition of interesting niche companies in Poland and abroad –
announced the President of the Management Board, Janusz R. Guy.

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